A home loan is a secured loan, wherein the purchased property acts as collateral. Thus, defaulting on the loan can cost you dearly, and the lender may seize your property to recover its losses. To avoid this, you must make timely repayment of your loan. An affordable home loan EMI can make repayment easier and reduce the possibility of a default. Below, we have highlighted some important measures that you can take to ensure that your loan EMIs are well within your budget.
- Make a large down payment
While a home loan can finance up to 80% of your property purchase, you will be required to pay the remaining amount from your own pocket in the form of a down payment. If your financial capacity permits, you must try to make a higher down payment instead of the bare minimum. By doing so, you will be borrowing a lesser amount, which will consequently lead to a lower home loan EMI.
- Choose a longer tenure
Home loan EMIs dependlargely on the loan tenure. The longer your repayment tenure, the lesser will be your home loan EMI. On the other hand, a short-term housing loan will have a comparatively higher EMI. Thus, if you wish to have a lower EMI, you can opt for a long-term loan. However, you must note that by opting for a longer tenure, you would be spending more towards the overall interest outgo on your housing loan. Whereas, by paying off the loan sooner, you can bring down the total loan cost by saving on the interest payout.
- Home loan balance transfer
If you’re already servicing a housing loan, you can consider transferring the outstanding loan amount to a new lender that offers a better rate. A lower interest rate would translate to a lower EMI outgo, and you would be able to repay the loan amount easily. However, make sure that you take into consideration the balance transfer charges before going ahead with it.
- Negotiate for better terms with the existing lender
Depending upon your repayment track record and relationship with existing lender, you can request for a lower home loan interest rate. This would imply a direct EMI reduction, and make repayment much easier.
- Make prepayment of the home loan
You can use your annual bonuses, increments, and other additional incomes to make part prepayments of your housing loan. This will bring down the outstanding loan amount as well as your monthly installments. Before making a part prepayment, you must make a note of the prepayment charges levied by the lender.
These tips can reduce your repayment burden, thereby allowing you to repay the loan without straining your finances. When you apply for home loan, you must make use of a home loan EMI calculator to get an estimate of your monthly installments. This will help you plan your monthly budget efficiently and repay the loan without any hassles.